Harley Davidson quintessentially says “The United States of America.” After all, Harley riders regularly emblazon the red, white, and blue on gas tanks, fenders and the leathers they wear. That’s why what we are hearing seems like such a surprise. In news headlines, Harley Davidson announced its intention to transfer some of its key motorcycle manufacturing overseas.
The thought of the iconic American bike-maker abandonding our shores, even for a portion of its operation, is nearly unprecedented. It speaks to the international business upheaval created by trade wars triggered by President Trump.
Now, in the few days before America celebrates itself from coast to coast, we are hearing that Harley may not be alone in fleeing the impact of trade tariffs. First, though, let’s deal with them.
Last Thursday and Friday, President Trump spoke harsh words to Harley-Davidson. His admonitions include threats of punitive taxes he believes he can impose.
Can he do such a thing? What would it mean? Here is what we know right now.
Spokespeople for Harley say the company will shift some of its production of Europe-bound motorcycles outside the U.S in a move designed to avoid retaliatory tariffs by Europe’s response to our initiation of a trade war. The Milwaukee-based bike maker says it stands to lose almost $100 million each year due to the trade war tariffs.
The European Union has imposed tariffs on $3.2 billion on American goods. These include motorcycles (hence Harley’s decision), but there is more. Orange juice, motorboats, peanut butter, cigarettes, bourbon, and denim are all being hit in response to the Administration’s new tariffs on aluminum and steel imports.
What would it cost Harley to pass the tariffs on to consumers? They say the E.U.’s 25% increased tariff (from 6% to 31%) will raise the MSRP on each motorcycle by $2,200 or more. The company says that kind of price hike is unsustainable.
Will the expected overseas move cost jobs? Certainly, some impact is inevitable but Harley-Davidson remains coy about just how many employees will receive pink slips. They say the job situation is “under evaluation.”
How important is the overseas market? It is more important now than ever in the company’s history. Harley used to sell most of its rolling stock to U.S. customers. But that has changed as the domestic market for big bikes has softened a bit. Harley-Davidson’s U.S. bike revenue fell 8.5% last year. It’s European receipts fell just 0.4% year over year. The steep curve of lost revenue recently cost Harley’s Kansas City manufacturing plant employees their jobs.
The trade situation is in constant flux and will remain so for the foreseeable future. Case in point, more motorcycle news that broke late Sunday. It appears that another bike maker may join H-D in leaving the U.S. Polaris (the maker of Indian bikes) revealed Saturday that they’re considering moving production to Poland from Iowa in an effort to avoid retaliatory tariffs.
The trade wars are just underway, but the casualties are beginning to mount. Money Examiners will keep a close eye on the action.